Waste

Not to mention fraud and abuse. Henry Aaron (not Hammerin' Hank, but the Brookings Institution economist) discusses getting the waste out of health care in this week's NEJM. (I'm not sure if there's a free full-text link because their site is down right now -- I'll update if it's available to the rabble.)

As you know, both of the presidential candidates are talking about cost savings by reducing utilization of health care services, albeit by different mechanisms. Senator McCain wants everybody to have crappy insurance that doesn't offer comprehensive benefits and requires high co-pays and deductibles. He figures you won't consume what you can't afford. Also, people who have chronic illnesses or are at high risk won't be able to get insurance at all. This might reduce some wasteful spending, but it will also reduce a lot of beneficial and even necessary spending.

Obama wants everybody to have affordable insurance, but he wants doctors and insurers to have better information about when procedures are indicated on the basis of costs and benefits. That sounds like a better idea to me, but it's a lot trickier than it might seem at first.

First of all, how do we measure benefits? Aaron doesn't actually address this issue in any real depth, so let me take it on as the first problem for this post. Then I'll tackle the other pieces subsequently.

One way is obviously the increased life expectancy you might get from, say, a cancer chemotherapy. This simple measure has been in the news quite a bit lately because the FDA has been approving very expensive treatments that appear to offer only a few months of live, on average, to severely ill people. This is an extreme case and it's actually one of the easiest, but it still isn't easy. There are two major problems. One is that nobody is average. Even if the average benefit in life expectancy is small, a minority of people gain much more. So you aren't buying 2 months, you're buying a chance at a year, or two years -- by which time who knows, there might be an even better treatment available, and you might end up with much more.

Second, how much is too much to pay for that? It seems to me our Culture of Life fanatics, who claim that all human life -- even that of entities with no consciousness -- is infinitely precious, would be forced by the logic of their own position to say that no amount is too much. But of course we don't have infinite resources, whatever we spend on that terminal cancer patient we are taking from some other possible use. Exactly how that works is not clear, but at the first analysis, the opportunity cost is other health care spending.

So how can we compare the value of all health care spending? Health care doesn't only extend life, of course, it also makes people feel better, look better, have better functionality at work and in daily life. So, to get a common measure, analysts often use Quality Adjusted Life Years, QALYs. A year spent really sick with cancer, or in a wheelchair, or in pain, or blind or whatever, is worth less than a year without those burdens and limitations. That seems to make sense at first glance, but wait a minute. If I have a limitation of some kind -- arthritis or a vision impairment or whatever it may be -- this says that my life is worth less than somebody who doesn't have that problem. I don't necessarily agree.

And again, even if we use QALYs or some measure we like better, the average benefit doesn't necessarily apply to me. I might get lucky and benefit more. Beyond luck, it's difficult to specify the full indications in detail in advance. My doctor might have a reason to think this is a better bet for me than it is for the average person, but that reason might not be fully captured in the guidelines.

So, we can get rid of waste that is unambiguous -- procedures that have been shown to offer very little, or no benefit, or to have risks that outweigh the likely benefit. But those are a small part of medical spending. Most waste is not on medical services at all, but on administrative costs. Those we can greatly reduce through single payer health care.

But the question of what constitutes wasteful medical practice is far more difficult. More on this later.

Site News: Pretty soon, I'm going to bite the bullet and switch to the new version of blogger. Chimpy comes down on November 5 anyway, no matter what happens, so I figure I might as well do it. I haven't decided what replaces him yet, the suggestion box is still open. But if the site is down briefly, don't worry. And don't be shocked if it suddenly looks different.